(CN) – The 9th Circuit vacated its interpretation of a federal credit-repair law on Tuesday, ordering a class to arbitrate claims of misleading subprime credit cardholders.
An apparently chastened three-judge panel changed course after a January clarification by the Supreme Court.
The lawsuit involves Aspire Visa credit cardholders who say that Compucredit and Columbus Bank and Trust advertised an unfeasible credit limit and the idea that the credit card could rebuild poor credit. Synovus Bank now owns the original credit card issuer, Columbus Bank and Trust.
Though the companies invoked the arbitration agreement, the consumers said that contract became void when the companies did not properly notify them of monthly maintenance fees and other charges.
Originally, the trial and appeals courts had said that violations of the Credit Repair Organizations Act (CROA) preclude the enforcement of an arbitration agreement.
But the majority in Washington, D.C., said that CROA disclosure clause did not cancel an arbitration agreement and give consumers the right to sue.
“The flaw in this argument is its premise: that the disclosure provision provides consumers with a right to bring an action in a court of law,” Justice Antonin Scalia wrote for the majority. “It does not. Rather, it imposes an obligation on credit repair organizations to supply consumers with a specific statement set forth (in quotation marks) in the statute. The only consumer right it creates is the right to receive the statement, which is meant to describe the consumer protections that the law elsewhere provides.” (Emphasis and parentheses in original.)
In a brief order Tuesday, the San Francisco-based appellate panel vacated its previous opinion and sent the motion to compel arbitration back to California’s Northern District.